Asset division is one of the most controversial issues during a divorce. If you are divorcing your partner, expect to receive a plethora of advice, some unsolicited, on how to increase your divorce settlement. Before following any piece of advice, don't forget that the current dollar value of an asset doesn't necessarily reflect its true worth. These three factors will shed more light on the issue:
Appreciation or Depreciation
The current dollar value can be misleading because it doesn't take into account future appreciation or depreciation of the assets. Two assets that have equal dollar values today may have completely different values a few years down the line. For example, you shouldn't think that a house worth $250,000 today is just as valuable as a stock portfolio with the same dollar value. What if one of the companies represented in the stock portfolio experiences a recall of its main product and suffers a market slump? If you arbitrarily chose the stock portfolio over the house because you assumed they were of equal value, you may experience a significant loss of your assets.
Tax Consequences
The Internal Revenues Service (IRS) has different taxation rates for different items. There are also specific rules of what is taxed and what isn't. Therefore, even two assets of equal value may be taxed differently when you divorce. For example, when you get the marital home during asset division, neither of you will be taxed as long as you don't sell the house and experience a gain. However, when you sell the house at a profit after the divorce, you will have to pay tax on the gain.
Liquidity
Lastly, you also need to think about the liquidity of the assets you are receiving or giving away. This is especially necessary if you don't have a fat bank account (or other liquid assets) you can rely on to sustain you without selling the assets you received during asset division. A perfect example here is a piece of real estate; it can take as long as 70 days to sell a house. Therefore, be careful not to receive only difficult-to-sell assets such as a struggling business or property in a buyer's market. Remember that you will be spending money, for example in the form of maintenance fees, while trying to sell your assets.
The best advice is to involve your family law attorney in the entire process. For example, if you receive advice from family members or friends, run them by your lawyer first. Doing that is the best way of safeguarding your divorce interests.
